Economist. Entrepreneur

Menu

G20: Merkel insists there are no divisions with Obama?

On Facebook by Timothy C.: “Good economic policy: if we make our fiscal and monetary policy more interconnected (one country doing one thing while another doing something else) we can make the overall global economy stronger and more prosperous.” In response to the title-sake article found here.

That’s what countries have been trying to do all along; it’s called, “Comparative Advantage“, and it’s based on a competitive market economy. No one will be willing to give the other guy a free ride as each one is trying to survive; thus to achieve the trade balance.

Countries have trade deficits because of their own reasons and causes, as each country is supposed to trade with the other, “Comparative Advantage” vs. “Opportunity Costs”, but for whatever the unfavorable variables and trade barriers and conditions, such as the case with the valuation of the Chinese Yuan, or excessive tariffs, etc., thus countries most of the time have unbalanced trade, and hence large trade deficits.

So, what else can they really do except may be lower the tariffs, etc.? And if so, what would happen to the other guys, the local guys? And then where and how will protectionism pour in to protect local producers?